Competitive pricing is about creating a set of strategies to maximize your company’s profits. To make wise, low-cost, high-result pricing decisions, retailers need to use competitive price monitoring software regularly, to track and analyze competitive pricing changes, i.e. both in real-time and over time to get the true picture of the competition and the marketplace, and to make the most intelligent, timely moves with pricing. Here are 11 ways to maximize profits using Competitive Price Monitoring:
1. Monitor Prices Every Day: Retailers need to continuously monitor prices. 6 Compelling Reasons Every Retailer Should Track Competitors’ Prices Daily. Retailers need to focus on the profitability (or lack of profitability) of every product. Retailers need to make their best-selling items more valuable and competitive. Find the products on which you may be losing money, and, unless it is a loss leader, fix them as soon as you can,
2. Monitor To See If You Are Charging Enough. When you know that your competitor is charging $299 for that leather coat (and may even be out of stock), and you're only charging $199 for the identical item, you know you've got room to raise your prices, make the sale, make more profit, and leave no money on the table.
3. Monitor First If You Are Considering Underpricing. Retailers have to monitor to know if they can compete with low prices. There are pitfalls to underpricing products hoping to drive up volume by offering the product as the least expensive alternative. 1. Pricing a lot lower than your nearest competitor results in thin or greatly decreased profit margins and leaving money on the table unnecessarily. 2. Pricing low on purpose, but not having brand recognition or recognized for an Every Day Low Price strategy, your product may be perceived as being “cheap” or suspect and people won’t buy it.
4. Raise Your Prices And Monitor To See What Happens. Use competitive price monitoring to figure out how much to charge for a particular product. Find out that if sales are steady, could you charge more without rocking the boat? To find out, raise the price of a product, take aspirin as an example, and observe whether or not customers continue to buy it. If sales remain steady, keep moving up the price. If sales fall off, cut the price back down to what the market will bear. The key is to constantly monitor the effects and track your sales volume to be sure that you are benefiting from these actions.
5. Use Price Monitoring Software To Know If You Could Lower Your Prices Without Lowering Your Prices. Huh? You may have priced your products too high for part of your target audience. The question is, should you lower them to accommodate everyone? (Answer): No. You can always discount your products or give customers something free in order to get them to try your product or generate traffic. You can, however, offer special holiday or promotional prices; or price promotions based on joining a club or email list. The key is that you are not lowering the price, but you are offering special prices to special people at special times. It is much more acceptable and easy to lower prices or to give special value or discounts for that price than it is to raise prices.
6. Use Competitive Price Monitoring To Suit Consumers Who Like To Have Choices In Their Buying Decisions. We've written about the psychological buying behavior of the consumer. The concept of Goldilocks Pricing, or The Good-Better-Best concept, that when consumers have choice, they tend to select higher value options. Why “Goldilocks Pricing” Is Perfect Competitive Pricing Ploy: Provides Customer Choice & Retailer Profit.
Bundling is offering another kind of choice in your pricing. Bundle items in an appealing, slightly-discounted way that makes more profit than selling each piece by itself, or that competitors can put together a matching package to compete with you.
7. Monitor Prices To Find Out About Price Differentiation. You need to use price monitoring technology to help determine whether you can charge more for a product or service based on geography or other distinguishing factors, i.e. price differences based on specific neighborhoods or ZIP codes.
8. Use Price Monitoring Software Regarding Less Product For The Same Price. This is probably seen more often in the retail business where items are sold by package or by weight. Same package with less inside; fewer pieces of candy in the package than previously. Actually, it probably begins with the manufacturers, but the stores then carry the item and price it, and they certainly don't want to charge less than they have before. Different proportions and sizes effectively reduce your costs without appearing to reduce the value to the customer.
9. Price Higher By Finding Additional Value In Your Product. In his book, The Art of Pricing: How to Find Hidden Profits to Grow Your Business, Rafi Mohammed urges online retailers to find hidden profits residing in their current products or services. Additional service with your product or goods of perceived to be of higher quality could justify higher prices. Do you make returns or exchanges without question? Do you cover return postage? If so, you may be able to justify a higher price.
10. Recognize Cost Efficiencies By Analyzing Your Price Monitoring Data. Find other ways to save money or make more money on each order. Break down each order by customer, product, price, and order size to figure out where money is being saved or lost: Examine your prices and sales to see if some customers were placing only very small orders of some lower-priced items. By the time your salespeople take the calls and locate the products, you are already losing money. If it costs $30 to make a trip down the supply aisle, make it worth more than that for a customer to place such a size order. In essence, offer customers a price break for ordering more products at the same time, and you both benefit!
11. Take A Creative Approach To Price Variables. Shipping is still a highly important point of discussion, contention, competition, and variation. Free shipping. Same day shipping. Next day shipping. Store pick-up. A company, which had long offered two-day delivery, switched to three-day deliveries, thereby saving enough to cut some prices without cutting into margins. Also remember that the customer likes to have choices. Let them choose the manner they would like. Don't overguess them; they don't always choose the lowest or want it the fastest.
Bottom Line For Your Price Monitoring Software Bottom Line:
Utilizing competitive price monitoring to the fullest is much more than getting your competitors’ prices and information and then reacting to it. You have to look at both their, and your own, pricing in new ways (and over time) to find out where can you make money, save money, and increase your profit margins. This race happens to be a marathon, so invest wisely in the best pricing intelligence software for your purposes -- and use it well.